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Anyone else think something's fishy right now? Seems to me that we might have had some more interest one way or another at these prices.

 

Fishy in what way N? Seems to me that sellers are selling at a major resistance point, but buyers want to hold it as they continue buying every little dip, and they were strong overnight. Would love to hear your thoughts.

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We gapped higher. It looked positive but then the action suggested otherwise. But then there was no real push lower either. Balanced up here? Seems like someone is waiting for either something to come out or a better price before piling in.

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As with all report days, the pre-position process begins around midnight (US west coast time)

 

The process is fairly simple....DAX opens and goes through a shake out...at midnight they start to mark it up anticipating a favorable report.

 

At about 4am PST participants in the US start to pre-position for the report release...and at about 4:50am the train leaves the station. The "tell" is the basing pattern that forms at 4:10am

and if you refer to the DAX chart you will see that at 4:50 or so, they retest a local low before taking off to the upside...nice bollinger band reversal at that time as well (see the attached chart). The strategy takes advantage of the "afternoon push" in Frankfurt.

 

The process is symmetrical when participants believe that odds favor a negative report.

 

For people in the US, you can play the midnight entry and hold, but you have to have the data to support your entry....I prefer to wait and get in later at 4-4:50 time zone so that I can see how the other players are positioned. You lose a little bit on the entry side but if you are able to hold a position, it is still a profitable strategy.

 

Good luck

Steve

5aa710ad6f46a_DAXshowingretestoflocallowpremarket.thumb.PNG.f3f5c21f43802226f2719fb4895017a0.PNG

Edited by steve46

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I think for many people Steve, holding a position into a big figure isn't going to be a strategy they want to consider. Whether or not you take a position before a release and if you carry it into or close out before the event, the positioning prior to an important release can paint an important picture for the overall auction and the RTH session coming up. So it's definitely worth people looking at what has happened pre-RTH open for the 7:30am CT releases.

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You are absolutely right. It IS risky to hold a position into a signficant number, the obvious risk is that we might be on the wrong side or "surprised" by the result and see the market go against us.

 

From my point of view in terms of professional particpation, I was taught that we are paid to accept.... and find an intelligent way to manage risk......how then does a professional do that?

 

Well we put a couple of important concepts to work...one is "profit scaling" ...another is position size.....and yet another is "proximity" to risk...

 

If we integrate these concepts into one idea, then what you would do is to start early in the process (say midnight or 4am of the previous evening) and simply put on 5 contracts, scaling out at 2, 3, 5, 7 and 10 points. Those with low risk tolerance could in fact be flat and out of the trade prior to the report release.

 

To the extent that one has an idea about the outcome of a report (and they are willing to accept some risk)..you might take partial profit and hold a small piece looking for additional gains on the report release.

 

and of course there are those who believe they have insight into the report result and are willing to accept more risk. When the report is released they are in fact the participants who cause the spikes up or down on your charts. Quite often they pre-position orders to buy and/or sell based on the expectation that the release will cause spikes up or down. This requires a different skill set and a method for accurately estimating local volatility. Its a subject in itself so I leave that for another thread.

 

Actually report trading is a complex...I just wanted to provide an example of how it can be approached.

 

Thanks

Edited by steve46

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It's definitely an interesting approach to trading. I know there are those whose's entire trading is based on trading the figures. However, I'd caution anyone who is interested in holding a position into a release or trading after it, by saying you need a solid plan for trading it and a fast connection with multiple news sources (as sometimes one wire will release marginally before another).

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Hope everyone had a great weekend. After having tested higher overnight, we've retraced back into Friday's range. Bernanke is chatting tomorrow -"The Effects of the Great Recession on Central Bank Doctrine and Practice". This may or may not be market moving so we'll have to see. Friday gapped up but couldn't close the gap and pushed higher. My focus is likely to be on the gap and the 2 ditributions I have highlighted. This market is still news driven so things can change quickly.

 

attachment.php?attachmentid=26448&stc=1&d=1318856507

Mondaymorning.thumb.JPG.f47305277efbf6199f0f0405b2fd0b6f.JPG

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Well that was a nice turn from 1203.00 and move back up so far. On the first chart I posted the balance profile have the low volume price at 1203.75. Actually, if you add in the 3 days prior to the start of the balance(4/5/8 Aug), which absolutely you can, the price is bang on 1203.00. The reason I hadn't included them before is I prefer to start the profile from where the balance begins. But the market is saying otherwise right now and we must always listen to the market!!

 

Here's the alternative profile:-

 

attachment.php?attachmentid=26451&stc=1&d=1318866751

niceturn.thumb.JPG.c62a305d47c4372a2dbbf55a812b1a32.JPG

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Yesterday's rally didn't manage to test the 1232.00 upside target. It didn't even manage to penetrate Monday's Electronic high at 1230.75 with the high coming in at 1229.75. It even closed below the swing high of 1224.00 from 8/31. So it's my contention that there's a decent chance they'll be some more development in what would be currently a 5-day balance if we get below say 1217/18.

 

In the chart I have drawn in both a 4 day 'confirmed' balance and the extended 5-day balance. You can see they are very similar. I drew in the red lines for comparison of the two.

 

This might happen and it might not. Either way it is information about the market.

 

attachment.php?attachmentid=26464&stc=1&d=1319030558

5daybalance.thumb.JPG.8406ab58f08b4185b531ad49ddd290a8.JPG

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The red profile you have is a 6 day balance you said. There is more overlap, and if you make it an 8 or 9 day balance, it shows a nice distribution around 90.

 

Yeah I agree. But I'm trying to focus on the actual balance here. If you look, that 1190 area is on the profile anyway, but quite clear on the balance profile as it's the balance vpoc(1190.75)

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Well I hope people did well yesterday. Following on from the charts I'd posted already, trading was fairly simple on this occasion. The red balance profile is 10/12-10/19 inclusive.

 

attachment.php?attachmentid=26487&stc=1&d=1319203443

5aa710af2b18b_pureandsimple.thumb.jpg.3292b58cc04040ffc9a004b632fe2187.jpg

Edited by TheNegotiator

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Wow, Friday already! I hope everyone did well this week. I think the key was to spot early that we were balancing. EU fun over the weekend and options expiry could make today interesting, which is why I've added some higher targets if there is a break. Of course it could just end up that the trading is much the same as the rest of the week.

 

attachment.php?attachmentid=26489&stc=1&d=1319203415

 

Good luck!

5aa710af3a4e7_Highertargetsforanybreak.thumb.JPG.4d679010433e2c3ed7f76e64fa33bf5e.JPG

Edited by TheNegotiator

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By the way Josh, I meant to ask you if you were trading oil at all when the Gaddafi news broke?

 

No was not, have not been trading oil since I started ES.. my limited focus only allows for one market at a time :)

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Lol. Don't worry I have limited focus too! It's too much to trade multiple uncorrelated instruments effectively and at the same time. Unless of course they're all in step with say the dollar. How's the ES been treating you?

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Lol. Don't worry I have limited focus too! It's too much to trade multiple uncorrelated instruments effectively and at the same time. Unless of course they're all in step with say the dollar. How's the ES been treating you?

 

This week I was up but would up flat after a down day today. Overall, not too bad, but I've got to get out of scalper mentality and set reasonable stops and let things work out more. For example, today I bought 22 at 2pm, and used a 2 tick stop. Perfect entry, and then I closed for +2 even though I saw the buying coming in. I should have scalped out 1/4 or 1/2 at 24 and held for at least 26. Then I saw a good re-entry at 25 but did not take it. Stuff like that is what's killing me right now.

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